Transcript for:
Guide to Filing Form 1065 for Partnerships

hello how to fill out form 1065 Us return of partnership income for 2023 if you have L LLC with motle Partners chances that you'll be required to file form 1065 so if you are required to f 10 10 C5 for your business for 2023 I think it's a good idea to use a TX software to file your tax return however you could pull form 10 C5 from IRS website to quickly draft put your financial data in it to see to have an idea what you'll be expecting by the time you are done using the software to file the return so to do that you will under that go you'll just on the search bar you'll tap 1065 for instance and we can just scroll down and um click and you'll be able to find the form that you might need so you'll need 1065 it is is good idea to download the instructions for form 1065 as well that you can read through highlighting that you might need to reference while filing and you might probably need uh schedule B one if any one of the partners is own the business 50% or more and schedule K1 as well so those are the form that are by default you might need but some other F might be needed depend on your business model as well let's get started we already download our form 1065 and we have the instruction as well we have the instruction and we have 1065 so form 1065 for 2023 U uh box or part a principal business activity this in this example though we can just put retailer and I like to use C and business product or service let's say let's just put home and living product don't know if you will have space for that or household product why not okay so business code for the business code number we do have uh few videos on how to find the business code for your business uh for your business but if your business if it's not the first year you are filing for your business you could use the number you used the previous year however it might be a good idea to double check that number to make sure it's still valid so to do that it'll be good to go at the end of the instructions for form 1065 to find the code for principal business activity and principal product or service and if you are a non retailer they change it um last year or so non retailer do not have like yeah people that sell online they don't have Breck and motor they do not have a code number for that anymore they will want you to use any number that is more tailor to the type of business you have whether you have a brick and motor or you sell online so they have some instructions there to specify and to describe that so we'll go look for retailer session to see what we are going to find and nont retailer sell all type of meas using such method as Internet you know so if you sell online you can you'll Fe that um criteria and they say those type of retailer should select the PBA associated with their primary line of product sold and they at the beginning they describe you know how to select the right code so you can read that as well but I just at the beginning I just pick one number and I just went with it but again if your business model change I think it will be okay to change the number as well or if you using a number that is not in the list anymore might be the time to change it as well but they do describe it so nothing here say you shouldn't trange it or you should trange it so you just can read it and see what best fits your business mod especially if that's your first year starting want to think through and pick a number that can be broad enough to incompass any other activity that you might want it to um bran child to that just be my personal advice so we are going to look for retailer and I'm seeing retail trade at the left here then I'm going to scroll to see home and living selling you know um household products heade product make it and sell it is what we are going to have as idea simple idea to work with so we have General mechan retailer here and then we have department store and we have Warehouse clubs super center and other General Mak retail so frankly I like the one that will say add is kind of broad but again the apartment store is kind of broad as well because Department saw they tend to sell different type of product so we could use the first one in this example so there is four there that I didn't pick so I'm going to pull four and then I'm going to past the rest so 4 55 11 10 okay so now that we have that number you will enter your partnership name the way you follow with your state so in this example we are just going to put business name LLC and then the address so we are just going to put some numbers you'll put the city the state and the zip code so employ identification number you will make sure you put uh the number and let's just go with some numbers here date the business St we are going to use an example and toal asset we can leave they say see instruction so there is some condition that you may not need to enter the assets but it's good to have a balance sheet for your business so that you know uh just for to just for financial Good Financial practices but again the software will know when to put a number there for you or not so check applicable boxes so if nothing there is applicable to your business you leave it alone in this example we are going to leave it alone assuming the business is not near and you can see the date we are working with check accounting method we are going to check cash here but if yours is acur whatever you chose that's what you stick with you do not change your accounting method without filing with IRS to um request approval for that and there is a form uh for that as well let me see if I'll be able to find the form here that is the in that is the instruction but that would be from 11:15 let me see if i p a 3 115 okay I only have the instruction here 31 in fact we can go to IRS website and we can search the form there 315 so if if you want to change your accounting method you will read the instruction they have instruction as well and you will complete this form and pretty much based uh following the soltion advice to go through but that's pretty much you know application for change in accounting method so but when you start your business you will choose number of schedule K1 attach attach one for each person who was a partner at any time during the year in this example we are going to work with two check if Schedule C and M3 are attached we are not going to check it just year but if after completing schedule B where they have questions if you are required to file those then is a good idea to come back and check it but again when you are using a software the software will check it automatically for you that's why using a software can save your time you enter your things once and you'll be putting them uh where you need to duplicate numbers it will put them there for you on those different forms that those numbers should go to and if you are using the same software here after year you won't have to keep putting your business um um name address so forth in the t software it'll be able to save those information you just have to double check it for accuracy so part one form 1065 part one income learning one gross receipt or sell let's return and allowances and then we'll have the balance which will be the difference between a and b so we are going to use inventory in D since we we choose a retailer that stipulate that we are or that we we have physical product therefore there is in things we might have inventory so at this point it'll be good to go to your finances to pull your financial data so it's a good idea to have your financial data ready that you can use to do this draft filing if you want to do the D fing before you start using the software to actually file but if you using the software right from the start it's good to have your finances ready your financial data ready for the year that way you can just pull your numbers from there as the software needs so we are looking for Revenue therefore we'll go to inventory and sell a worksheet and by the way um you can find that inventory and sales worksheet at n soap n so.com and it is free under free download but we do have spread sheet we sell at liba download.com as well so on our blog you'll go to from the main page you'll go to free download section and if you do not have a software to track your inventory to manage your inventory and your sales you can just scroll through and you'll be able to find we have some versions that you can work with you can see which one match your business model well and the difference between the two is because one allow you to apply sales tax on services for your state and the again one all allow you to uh not apply sales Tas state sales Tas on Services because for instance in our our state there is some services that Sal ta is applied to and some that is not so it's good to check your State website for those but I just prefer to just apply I sales ta on Services sold to um residents from our state buying from our business if that makes sense so okay so now that we I think our spr should be open by now and we will be able to find the gross receipt in this example the gross receipt is 2596 adaa and if you are designing your your spreadsheet yourself you can just see the you know the way the form you are going to file for your business is structured and design your spreadsheet in a way to be able to pull your data to be able to you know to file your return so 25 96 ADM so we will put it on a 25 96. what is allow me to do that let's see okay but it needs to be rounded so seven and if any row is is not applicable um to you or is zero you just leave a blank so in this example 2597 we can D check it again 27 259 7 return we do not have any return and therefore Line 1 C will be this minus Z and that will give me 2597 so two cost of good sold so since we have inventory we'll go back to our inventory spreadsheet to be able to find our cost of good so so if you are tracking inventory you will be required to file from 1125a to report your beginning inventory purchases during the year and year and inventory to find the cost of goods so that will go online too we do have a a task uh a video that went in detail on um that that explain it so we are going to quickly pull a task form 1125a I can search it as well okay we can just copy this and we can go to our file if I don't have a yet yeah we can just space it there so when you are using the t software when you click on a yeah I think usually if you are using it as a client is going to be in the interview mode therefore as it asks question questions it will automatically pull those answers that you are giving data that you are giving in the right form for you but if you are using the form mode of the TK software then when you click on a line is going to automatically depend on the software it might give you uh a folder to click on and that folder will take you to the form you need to complete again I'm just I don't I'm just talking based on one software that I use but yeah I think every software will have their own way of doing that so here we are going to put the business name and the identification number if we can remember what we used before an inventory at the be beginning of the year if that's your first year being in the business CH that your January 1st 2023 inventory will be zero but if it's not the first year you are been business then therefore you you need to use your January 31st of last year which will be the same as January no December 31st last year year end inventory which will be the same as January 1st of current of the year you are falling for okay so in this example since we are filing for 2023 if your business is not new your inventory at the beginning of the year will be December 31st 2022 year end inventory which should be the same as January 1st 2023 beginning of inventory that numberers should be online one and if you are using the TA software it will automatically pull it if you use that same Tas for the previous year and I think sometime sometimes software allow you to import from other software or so but in this we are going to go and find what we have in our example here and is I'm going to make this little bit small and I don't know if I'll be able to do both so our beginning of year will is going to be a044 and we can add the sense as well so that mean we'll go to that column to put the sense so line two purchases line two purchases is not that c curent the way I like to do it is purchases during the year which will be raw materials if you hand matings minus out of inventory of raw materials plus the value of or the cost of your finished product that you put back in inventory so when you buy raw materials you use them to make finished product so you have to do the same thing to your inventory that mean you bought raw material you it is an addition to your inventory and then you took some out which will be a substraction from your inventory and then you make finished products and those finished product pretty much will have a about the the cost to those finished product will be about the same as the what you took out of inventory if you don't not other cost where and then you pull them back to your inventory that will be another addition so that mean my purchases during the year is going to take all those three factors in consideration and that in this example is a836 so I'm going to use a ad 36 cost of Labor I'm not going to include it here line three is not applicable to this one five other C attach a statement if you put something on that line you will attach a statement line five total of line one to five so total of those two ad4 4.44 plus a a 0.36 will give 942 let's move this to this area or we we do have a here too so if we know the right line that we need to be on is line C so uh a 924 79 okay so l seven year end inventory so year end inventory on our inventory um inventory is 79743 7970 43 cost of good so will be line 6or line 7 89 2479 minus 79704 3 3 and it's going to be 954 36 okay so 954 so we will go back to and we can see it as well cost of good sold in this example so we will so we'll take we are not done with this form so check all that um qualify so we will check that cost and B is there any rting of subnormal is good to check yes if you are keeping track of your inventory and if the lifeo inventory method was used and we didn't use it so we leave it alone and we didn't use that either pretty much that mean last in first out it's good to use five for first in first out is term of cost when you have multiple raw material purchase at different time frame when you are taking it out inventory to make finished product the cost you are going to associate with that finished product if you didn't use all the raw material that you purchase for that product it's good to use the cost of the first items that you that you put in the inventory if you purchase them at different prices so that would be first in first out so when you are selling those finished products the cost of that good so should be the cost of the first finished product you make if you made that finished product multiple time during the year and the cost associate with that is different it's good to use the first that you that you made the cost associate with it the quantity of those that you made that first time is good to to asso to take your product sold out of that batch so that it will be first in first out if you are using last in first out method you will track that bus and you'll have more paperwork to work with so line e if the property is produced or acur for res tell do the rule of apply that so I for this one I'm just going to see no but if it apply to you you might want to read the instruction on it the instruction is below was there any change in determine the quantity cost of ation between opening and closing inventory I'm just going to say no but if you say yes then you have attachment to add to explain it but then you can just see the information that they have below but I'm not going to go um too much into that but yeah now we'll take our number from here and we will go to our form 1065 954 I believe and we will add it gross profit so gross profit here and um so gross profit here we are going to do subraction of line one C and line two so we are going to pull this and that is going to be 2597 - 954 and that will give me 1643 1643 so things are you are going to round on the main form and the software of course will do it for you even if you add the numbers with decimal the software will be able to round it for you so or ordinary income or loss from other partnership estate and again in case I didn't mention about keep in mind that if your business activity is active business activity that's when you put put your numbers on the page one and if you and what is considered business activity you can read it in the instruction so I'm not sure I'll be able to find that quickly pretty much they explaining what is not a business activity but I'm looking for what is considered a business activity so let's go up a little bit more here and you can find those around page between page 10 and 17 or so and it's good to know what is portfolio income what is considered passive activity and what is consider active business activity so the following iring passive activity trade or business activity in which the partner materially participate during the year but this is related to the partner not so much to the business itself but um let me see the should to explain what um uh not a business activity is though in this okay trade or business activity great well can I highlight that a trade or a business activity is an activity other than rental activity or activity treated as incidental to an activity of holding property for investment that involves the conduct of a trade or business within the meaning of session C2 and if you just tape that section one C2 and Google it you should be a to read about it so it's conducted in anticipation for starting a trade or business or involving research and so forth so if the partner doesn't Mally participate in the activity a trade or business activity conduct a through a partnership is generally a passive activity of the partner in that case though the the trade or the business is a trade or a business for the business but not so much to that partner that didn't participate in it so you still pull put your data on page one of 1065 and and the profit or loss from that page one will go on schedule K line one will get to it and it will go on B one of schedule K1 as well they own the the times the ownership percentage for that partner so that partner portion will go on in box one as well however you cannot had an attachment to mention that it is a passive activity for that partner or that partner when that partner is filing 1040 that partner will be able to uh to select the right um should be able to make that number at the right SP whether that partner materially participate in the business or not so the software the partner is using to file his or her 1040 will be able to put that number on on BS one at the right SP so pretty much if that is a loss that partner that didn't participate in the business will not be able to deduct that loss against an a W2 income for instance it can only deduct it against apply against a carryover from previous year a profit from passive activity that you know that partner has so that's the way it works and it won't be able to deduct that against a portfolio income either but again if when you read the instruction you'll be able to understand more in detail so and so so each partner must determine if the partner materially participate in an activity as a result while the partner ship or ordinary business income or loss is reported on page one of 1065 the specific income and deduction from each separate trade or business activity must be reported on attached statement for form 1065 similarly while each partner distribut share of the partnership originary business income loss is reported in box one of schedule K1 each partner distributive share of income and deduction for each trade or business activity must be reported on attached statement to each uh schedule K1 and then they pretty much have those so you can see passive activity um information as well but there are some instances that rental property might be considered active so they have um things that you can read if you have a rental property any rental property will have LLC so for to consider a rental uh property as now a passive activity any rental activity a rental related activity in which the partner materially participated in so what will consider is if the partner made both of the following condition more than half the personal service the uh the partner perform in trade or business where perform in Real Property trade or business in which the partner materially participate so pretty much the number of hours you spend on your business more than half of it of personal service that you perform in it should be um more than half of the personal service the partner perform in will perform in real property trade or business in which the partner materially participates so more than half of personal services that you provided should be performed in those three section either one of those three section so real property trade or business in which you materially participate in so the partner perform more than 750 hours or services in we in real property to or business in which the partner materially participate so you have to work more than 750 hours uh during the year and more than half of the personal services that you perform Services provided um should be in yeah should be perform in that so pretty much yeah you can read and see how it works with you and then they advise not to combine spouses together or if you want to combine it I mean you can read about it as well so now they con the they go went forward to explain what that will entail so a real property trade or business so pretty much so the way I understood it though is the business you have if you have rental real estate and some other things going on together you have to work 750 hours or more in that real property trade and more than half will of whatever time you spend on your business as a whole more than half of should be related to that real estate property trade that you are that you have so you so you it will help you track you might want to track your hours to be able to um you know know if you are really um within if you are doing if you are you meet that requirement so a really property trade or business is a really property development Redevelopment construction reconstruction acquisition conversion rental operation management so rental operation management leing I think 1 2 3 4 could be applied to rental property businesses if you manage your your own rental so and yeah so I think that is included so a real property trade include all of that or brokage trade or business so Services the partner perform as an employee AR Trad as perform in a real property trade or business unless the partner own more than 5% of the stock or more than 5% of the capital or profit interest in the employer so yeah it is good for you to read it through if you have rental property and you want to treat your rental property as a trade or a business rather than a passive activity but then they have you know an activity of trading so I I'm not going to continue um reading down but yeah you can use um you can design a spreadsheet to track your hours that you are working and you can design it in a way that you'll be able to you know track what portion of your time is spent in which activating the business and depend on your this business model you can adjust it to mirror what you are trying to track as well if you don't have time to design your own we do have at Libra download we do have let me see under shop we do have uh a ter log that you can purchase as well is in there somewhere there but I will I can show you the way I track let me see the way I track mine if that can give you an idea how you can design your own and we do have one at Liber download for purchase so let's go back to our record here and see and we are done with our inventory and sales spreadsheet so I'm going to close it but yeah you can pretty much you can design your own or you can purchase one from LA downlo.com but you do have you can have function T um tab that you can download you can um summarize uh hours by person or by principle function or activities as well to pretty much you know see how much time you are spending in each area of your business one way to actually see how much time you are spending your own business and if it is needed for your and by department so this version is not for sell yet it's going to be there but we do have another version there as well and but yeah you'll be able to to you know designing to track your hours just in case you need it to um as a reference to you know to see if your rental property in this case can be classified as a trade but personally I would prefer to just skip the rental property as a passive activity since I trying to um um you know TR um consider that as a passive activity so they have more on on rental activities here that you can read as well but anyway so I think we are done explain that and while we are the door if you have a rental property you are not going to put your information on page one like your income and expenses are not going to go straight on 1065 page one they will go straight on schedule K and we can scroll and see schedule K and that will be the profit or loss from form 825 that you'll put online to of schedule K only ordinary business or trade or business activity will go on page one on page one and they put it only trade or business income and expenses so aa25 we can open it for you to take a look at how it looks like so y'all I think he's little bit okay uhoh okay so you'll be able to put your property information the revenue by property so it's good to track those by properly if you know you are going to file those forms it's good to take a look at the form sometimes it helps to know how you should track your data your financial data as well so you'll manage your property to know how much everyone is bringing in and what the cost the expenses are as well and it's allowing you to put the rent and then the expenses associated to each one of those properties even the priation will go on on on this form wage and salary associated with utilities pretty much everything will go on this form and those expenses they have uh originary business or trade and business version on page one um open it the wrong one on page one they have you know uh version here for trade or service providers or active business activity owner they have you know deduction space for it for rental property on form a25 they have the rent for the revenue portion and then they have the expenses portion as well for all your expenses to go on and the profit or loss the profit or loss Will Go On L from line two okay oh sorry um I'm looking for so the total from line 21 will go on form 1065 or 1120s schedule K line two and we can see 10 cc5 schedule K line two and on 1120s schedule okay line two the profit or loss if you have rental activity like other than real estate other gross rental income or loss they have line three for you to P the income and then expenses from other rental activity or attachment you put the expenses related I'm kind of surpr they put income or loss though is if like if you are going to do the profit the income against the expenses and use the profit to put online three but it seems like it is the income and then the expenses and L 3C will be other n rental income loss income or loss which will be on line 3C and again if you are in that type of business don't if you to be able to find it quickly press yourself I'm going to scroll fast but when you are fing and you are and you do not understand a session it's good to just go through the instruction and read about it to see you know if there is something there that um if the instruction is clear enough for you to be able to understand it so that will be on page 35 five enter online 3A gross income from rent to activity other than those reported on form ada25 include online three gain or loss from form 4797 line 17 that is attributable attributable to the sell exchange or involuntary conversion of an asset used in a rental activity other than rental real estate activity and then online 3 B the deductible expense of the activity attach a statement to your form 1065 and 3C will be you know the profit or the loss so and they will go on schedule K1 as well so and you can read on the guaranteed things but we are not on that session so I'm going to go back so now and another things I like to so the guaranteed payment you'll have it here as well so it will go on schedule K and in fact we are talking more about schedule K here so I think just to know that reality income will go on schedule okay now on page one of 1065 dividend and interest will go through on schedule K as well so now that we know where our um incomes and in interest income dividend dividend are considered portfolio income so it's good to know what portfolio income reality could be included as well so portfolio income real estate income and other um rental activity they go through on schedule okay they are considered somewh passive and trade and business income and expense related goes on page one of 1065 and in this since we are talking about retailer we are talking about active business activities so we are going to we are going to leave line for ordinary income loss from partnership we are going to deliver loone net farm profit we is not applicable to us n gain net gain G from form 47 97 you can read to see which portion should go on line see here sometimes when you claim early depreciation or special depreciation or um how do you call that session 197 is it what that is we'll come across it again somewhere on schedule okay to expense your depreciable asset the first year that you plac in service instead of depreciating throughout the year if you um you didn't use it for the time frame that you're supposed to depreciate it the early depreciation that you took could be added back as income and it could go online since it will go on a phone before it will show up online six and again you'll be able to read the instruction on that bre your St I'm going to go a little bit up here and include only ordinary gain or loss from the sales exchange or involuntary conversion of asset used in a trade or business that portion will go on page one so the one that is Rel to real estate will go on schedule K and they have um SP for there okay so now we are going to leave a blank because it's not applicable to us other income is not applicable to us but then if you read it you'll know what other income entails and they'll be able to explain it in detail there line is total income or loss is going to be the sum of three all the way to S and it's going to be 1643 salary so again you need to pull your payroll um um data and if you do not have a payroll if you are not using a payroll software to track your payroll you can design a spret to do that we do have we do have um free payroll worksheet that you can use I'm going to open the example Journal here but at NAS so.com under free download we do have multiple payroll opt um option to choose from and the pay free payroll spreadsheet from 940 B2 to F2 can allow you to track your payroll to file form 940 form 944 form 941 and uh to file W2 and W3 with SSA Social Security Administration and if you your your you are monthly your your your deposit schedule is monthly uh deposit schedule you'll be able to use it if you are a biweekly scheduled depositor it will not work for you although you can modify it it track on is track on a daily basis but it do not it does not have a summary tab to pull it on to pull the data on a daily basis to summarize the daily entries the daily to payroll but if you are a bi weekly deposit when you are filing your employment return you will file a form that require you to put your date pay rooll liability on it so it will not work for you but if you are a monthly depositor it will work for you because it track your data at the call level and at the monthly level but you can take a look at it to see if it can work for your business model that's if you have payroll if you are a NLC falling 1065 you the partner working in the business you are not an employee of your own business but if you hire other people to work in your business you'll pay them salary so their wages will go online nine I'm going to use an example here and put 200 and something about it is Technically when you are putting the payroll I will if you pay you the the income tax withheld from the employee salary social security and Med we've held from the employee salary you can put that gross wages online n of 1065 and that mean where you have taxes and licenses you'll only put your unemployment task your employer a portion of Social Security and Medicade that you paid if you put the take home pay online n then online 14 you will put your unemployment Tas your employer and employee toal portion of Medicare and Social Security and employee income tax withheld because you withheld those and you deposited to IR so if you didn't include what you held from the employee salary if you didn't include online 9ine then you can include on line 14 but if you include the if you that mean you use the take home pay online 9 but if you use the gross wages before tax online n you just make sure you do not put it you do not put the employee portion of those taxes that you with held make sure you not put on 914 otherwise it will be like you are doubling number duplicating numberers just keep an eye on that in this example though the bookkeeping that I open I'm going to close this one the bookkeeping that I open I um have the payroll just to take home pay therefore I'm going to just use that but I don't think that's a right way of doing it though unless you using the cash method and while you with h you deposited that year to IRS but yeah so just keep that in mind and then I'm going to so that mean that number will have both employee and employer portion of the task just that it's not one way of doing it and then you have guaranteed payment to the partners you have repair and maintenance you have bad debt rent T and licensees I believe it's 138 or 139 we can check it again let me make a little bit 13 139 okay this PR is adding up and interest we leave a blank depreciation if requireed attach form 4562 okay so we are going to go back so um I'm going to close this one for now and we are going to work on CCNA depreciation if you purchase an asset um during the year that you are filing for and you place in service during that year you will file form for 562 depreciation how de depreciation in uh form 4562 how to depreciation amotization form so I'm going to it's taking it back here um open both depreciation worksheet and we are going to I'm not seeing it here but we will repl some in this example we place some asset in Serv during the year therefore we need to complete form 45 C2 so we are going to copy we will go to in our folder and let's open it it's good to track your assets if you depreciate them I do not claim session [Music] 17 uh session 197 I'm confusing numbers now so I'm seeing too many numbers that I'm getting confused but if you are claiming them I think it's still a good idea to track your asset just in case of IRS has a question for you you have answers for them okay so how do you depreciate a business business asset we are going to debate using GDs General depreciation system under the Marco under the mar so how do you depreciate a business asset it's good to track your business asset that you purchase into record the date you purchase them and how much you pay for them including the Tas the state sales Tas that you paid and the date you place them in service so to depreciate the asset it is a good idea you have you you have a basic understanding of how that works again using a t software to depreciate they will have some question the t software will have some question for you what the item is when you purchase it or place it in service the cost and based on your answer the the software will be a to to uh determine um the convention to use and if the typ of the recovery period for sure the classification of property as well the recovery period and by default the software will choose the depreciation method as well and the one that will give you the highest deduction will be 200 DB um but I just like to use straight line therefore I actually choose straight line but again I don't know the software should be to give you option to give to give you the opportunity to choose choose but by default the software R the highest one that will give you a good amount of the pre um deduction but I just like to go with straight line so that I and keep it straight but yeah so now that we know those things let's go to the instruction so you will need um form 9 for reist no publication 9 for reist how to depreciate properly you will need instructions for form 4562 depreciation and amortization okay so on note that you have a record of your assets when you purchase them on the how to depreciate a properly publication line for rece we are going to go to the bottom of it and let me see if I use 100 okay at the end of the publication there is two table table B1 and table B2 and there is a little instruction before1 and it's good to read that instruction so what you all B down to is when you have a business and you purchase an asset to use in the business and you want to depreciate a for the number of years that that asset is depre for there is two table that you can use to determine how long you need to depreciate the assets so if the asset is list in the table B1 you will check table B2 table B2 has the list of businesses activities and underneath each one of them they have a short description of the type of asset they use in that in in that business activity with that business activity so if your asset is listed in that table B2 if your business activity is listed in that table B2 and the asset is describe their specific speically listed you will use the recovery period under table B2 for that asset but if your business activity is listed but that particular asset is not spelled out but your that asset is list in table B1 you'll use the recovery period of table B1 if the asset is not listed in table B1 but your business is L in T2 and the asset is spell out in T2 you use the recovery period from table B2 if the asset is not list in t B1 and your business is Le in2 and the asset is now describe in table B2 you'll use table B2 recovery period so they pretty much as describe it up and just to make sure I didn't confuse you let's read it together you need to look at both B1 and B2 to find the correct recovery period so generally if the property is list in table B1 you use the recovery period shown in that table however if the property is specifically list in B2 under the type of activity in which it is used you use the recovery period L under the activity in that table meaning table B2 use the tables in the order shown below to determine the recovery period of your depreciable property table B1 check table B1 for a a description of the property if it is described in table B one also check table B2 to find the activity in which the property is being used if the activity is described in table B2 read the text under the tarot to determine if the property is specifically included in the asset class if it is use the recovery period shown in the appropriate column of table B2 following the description of the activity if the activity is not described in table B2 or if the activity is describ but the property either is not specifically included in or is specifically excluded from that asset class then you the recovery period shown in the appropriate column following the description of the property in table B1 and they have example here that is useful as well to read table B2 if the property is not l in table B1 check table B2 to find the activity in which the property is being used and use the recovery period shown in the in the appropriate col following the description and then they have a session that if the property is in either table if your activity is not in table B2 and the property is is not in table B1 they have certain property for which recovery period ass sign you will use that but again I'm not going to concern much about that one but let's start so the first thing that we are going to use is not really applicable to those so it's going to be a graphic design computer software it's considered other than 197 okay so if this one is using 197 so this section let's go back to our depreciated assets because when I was talking earlier okay so it's 179 section like where you can expense the full amount so I I reverse the numbers but okay so but yeah I do not claim session 179 I depreciate though that's why I'm going to talk about depreciation but again if you are going to use session 179 where you will um D the full amount of the asset in the first year that you place in service it'll go on part 10 14562 and there is a limit the limits you can depreciate as well you can claim um like that but the software will be able to guide you on that and I think by default software tend to to claim this for you if you qualify but just keep that in mind if it's just going to be too much of expense to the point that your business will have a loss it's up to you I don't think is is necessary or if your business is already really has a loss I don't think he you really have a a reason to claim that session 179 it's good to claim it if you have a big profit it can lower that expenses but you only claim it the first year you placed an asset in service though just keep that in mind I just don't use it and I just keep one one way of depreciating asset to just make it simple since I'm fing the business to return myself okay so uh we are talking about the first asset and the first asset is a graphic is off the shelf let's just consider that as off the shelf software place in service at the beginning of the year based on IRS instructions which is in the instruction for form 4562 and I believe is going to be um page five or so you can see the limits there for session 179 you'll be a to see the you be but intangible property other than Session One seven in tangible including the following computer software use a straight line method over 36 month so and Bas on this that mean is going to be let's go back I didn't use it in this example though but we can let me duplicate this form and this tab so as for that one they said to reist month so I put a reist month they say to do that for the month is 3 years so in this example the way I did it I just trying to use the regular depreciation uh criteria for it as well and by default I use a half year but based on the instruction the best way to do that in my opinion since it it when it was used at the beginning of January so pretty much it was used for 12 months that first year therefore if we keep that theist I'm going to change this out of here and instead of using six I will use 12 and then the last year will be 12 as well because they say to to depreciate for 36 month you'll take into consideration the number of month you use it the first year if you use it the way I did it earlier I put six mon because I try to use half year for all of them because they all qualify for half your depreciation method and I just use that but the best way to use to do this one because it's not going to go on the line that the others will go on the depreciation form the best way to do this one it will be to just use the monthly or full month uh convention use that to reist month and use it from January all the way to December is 12 so 36 month the number of month you use the first year divided by that re month so if you use it for two months months meaning you put a in service in November early November that mean the last year will have the remaining 10 month for the total to be 100% so I should not have anything in this one you see that's why it's good to do that you should have 100% 36 month if I took 12 month the first year and the second year another 12 month the third year another 12 month that'll be 36 there 3 years but the way I did it before I took six month the first year therefore I took six month day last year that make it four years but the I think the best way to do this one will be to go without a six month and instead of doing half year since I start using at the beginning of the year to use 12 in that regard though by doing that is going to affect the first year depreciation amount if I go back to the way it was before I took a half of it and the other half will be the last year so that I can pull in the depre the same side of the depreciation form but so now that we have this one we can actually just take this number and go put on the form so this is going to be 35 if we go to the depreciation form is going to be on l c again first let's put some stuff here we'll put business name LC business activity let's just put retail and again the weird identification number we have been using and we are not going to claim session 179 we are not going to claim special depreciation allowance but in that session though they have other depreciation including acrs and that's where we put this number 35 the way I like to do it though is now using that but just put it um under Section B three year period 3 years to reist as well that's why I converted to half year because the other asset qualifi for half year by now being mid quar for things to in De session though it was going to be either mid quarter or half year and only real estate will be Min month and then you have pretty much going down so half year of or mid quarter convention are the options here and I like to go with half year therefore I don't don't like to buy business assets the last quarter of the year am I saying right yeah because if you buy asset the last quarter of the year you have to make sure uh the the cost of those assets that you place in service that year 40 the the Toro is not more than is not it's less than 40% or so for you not to use mid quarter and to use half year but if you put 40% or more Assets in the last qu of the Year October November December compared to the whole year you'll be using mid quarter so that mean you need to track you by tracking when you place a asset in service you'll be able to determine the mid quarter for each one of those assets that's why I do have you know um the quarter session to list them as well but there's in s is that let me see that placing Assets in the service the last quarter Co make you have to choose mid quarter for everything therefore you you know you need to know those quarters that you place the the service the Assets in service so I just like to go with I like to avoid that Angelic Angelic you cannot do laundry while I'm recording so if you put your things in it just leave it open otherwise don't put your things in the machine yet thank you so now let's we we we dealt with the first one so now let's go back to the rest so we have this one so what I'm going to do did you see this one that we just because we have multiple in fact let's work with the rest first to fill up this this form to show you how this form is fill so we have a USB so if we go back to uh the publication 946 we'll check uh B1 B1 and B1 here if you read it I'm kind of inclined to say that USB to plug into a computer and it's called like external memory type will is is is it can be included in those those dis Drive dis file and so forth therefore I'm going to assume it is in table B1 now let's go to table B2 to look for the business activity T B2 and those are the business activity you can read through to look for your business type but instead of scrolling I'm just going to oh let's just do that this time if you are having an issue finding a publication on a form on an i address website you can check n.com on the right above the free download session we do have application session that we save links to IR form so you can check there to see if you can find the form of the publication you are looking for it should the link will take you to the RS page the last version of the the form of the publication so we have 570 distributive trade or service so include Assets in a whale or retail trade or personal and professional services so thatment include trade Business Services everything retail word and whole Cale so it does not specify USB external whatever that is but therefore we'll go back to the B one and we will use recovery period five the class life is six and the asset class is 0.2 so we'll go to the our record and we will put 0.12 table B1 asset classes and if we continue classification of property 5 year property recovery period is five and all of that came from that table B One recovery p period and class life so now we'll take that information that we put on on here we put the recovery period and then classification of period you'll find that in the instruction so we'll go back to the instruction and I okay it shouldn't be too far from here let's see determine the classification so class live I believe is six for this one class live six so when you go to the instruction class live more than four but less than 10 it correspond to classification 5 year property so 5 year property we put that on our spreadsheet 5 year property so knowing the five year property although we already know that there recovery period is five because our publication told us that but for confirmation when we go to uh the instruction taking the classification 5 year property when we scroll up a little bit we'll find the recovery period so classification 5 year property is for 5 years so that mean you um depreciate for five years so that's how it works so now let's while we did that let's do another one that is related it is USB file transfer cable and again we assume is going to be the first table again the peripheral computer and the class year is going to be six day place in service the nine same um month 100% business use and 5 year um classification of property 5 year property leading to five year okay so now that we got those two out of the way we'll go to microphone here so microphone publication table B one is does not really L it I mean you might say a peripheral of a computer but I don't know so you can scroll on the first table be one to read what is included and the first 0011 is for Furnitures of these Furnitures and then the second one is information system but I anyway you can read it but you can you know and see what is in there and I'm going to assume it's now here so if I assume it's now here then I need to go to uh table B2 look for the business that is using the business that is using is L asset 57 asset class 57 the um microphone is not list here specifically list here it is not list in one the business that is using is listed it is not listed in that business therefore I'm going to go with the asset class the class life Rel to that business activity it is nine and the recovery period is five so again under GDs markers so I'm going to go back to the spreadsheet and I'm going to put um the type of depreciation system I'm using 57.0 tb2 class life n 100% use and the recovery period is seven is five is five but again the classification of repty related to year is 5 year and and the way to find that is taking you see the asset class is nine so taking the asset class that I recorded if I go to the instruction it is it say that anything less than 10 year is 5 year properly classification and Recovery period associate with is 5 years so those information came from there so that's how you use those two publication and instructions to retrieve those information so I have that and the next one is a camera and it's going to be the same thing it's not in the um um um is now on that page 97 and we are going to do it with the tripod as well it's not on the first that be1 therefore we will go to table B2 the business that is usern is listed therefore we'll use class life nine recovery period five we'll record that on our sprad sheet we go to the instruction class nine class life nine is less than 10 uh classification 5 year property convention related to that classification 5 year property is 5 years now that we have and that is a tripod that is a camera now that we have those information listed for for for red for those two 5 year property 5 year property 5 five now we move to the next step which will be which convention we already know the recovery period to use so we need to figure out which convention to use and which depreciation method to use and and you can find that I like to use the publication 946 and that will be append this a so let's go up a little bit and I think I'm just going to use 50 here but I think it's going to be 99 no it's not 99 let's use 70 so I this a macro percentage table guide General depreciation and alternative depreciation system so now that we have the recovery period we have the mro system we want to use we need to choose the depreciation method we want to use and that will guide us to find you know the rate to use so um and in my case I like to to use straight line so I'm just going to locate that so I know that is jous the recovery period I know is five so if you are doing it you want to use 200 for instance you want to make sure your recovery period and the 200 and you have then you'll use half or me qu or whichever qualify for your business if you didn't Place 40% or more of asset in the in in service during the year in the last quarter then you don't use mid quarter therefore you'll fall back to half quarter and that mean you will use the first row and class life associate with it and then you'll use that table because it does not matter the quarter you use half life that means 6 month the first year year you'll depreciate and the remaining six year you'll depreciate that the last year so that will take a 5 year recovery period to six a seven year to to eight because you'll take half the pration the first year and the other half the last the last year and in this case I'm going to use straight line therefore I'm going to look for straight line options that they have they have half year and M mid quarter so since I qualify for half year I'm going to stay with that that that row so DDS line that mean I'll put that on my spreadshe DDS me see if we be to see the tarot as well half year for half year they say any class qualify and then qu place in service they say any quarter and therefore you will use one rate the case is that you will need a mid quarter though each quarter has its own rate to use so I like to avoid as much as possible by now buying things the last quarter of the year for the business just because it's on sale but again you have to see which one works for you the headache of the saving but anyway and that's just the first year that you'll go through that trouble but if you are using a software it'll be able to do it for you you just is but you still have to keep your date you place in service to be able to which you have to do anyway so the the software you'll be able to um use the appropriate rate or whatever the software is using so we are going to use A8 so I'm going to put that information in the spreadsheet so we have convention half year depreciation method straight line r table A8 and we will go copy that right table and put it in so we'll go to append this a we are already appes a will just continue looking for A8 table and I'm just going to speed that by doing 77 for instance 75 73 or so 73 table A8 straight line method half year convention and then they have because for other years they have that too so but now we are going to find what we are looking for because you need your recovery period so recovery period for for us is five so we are going to use the year that say five for the recovery period so five that mean you are going to recover within six years 1 2 3 4 5 six so if your recovery period is 7 year you will go to seven colon o and so forth but our is five recovery period you see five and therefore we are going to copy the rate and put there and you can see 10 that mean it's just half of 20% and the way it works is because I'm using straight line so something that needs to be depreciated for 5 year 5 years is C months so one year which is 12 / by 6 month is 20% and six month of that is 10% so that's pretty much the way he is working the straight line and that works well for that three year that the software was for as well if I'm not taking half and I'm using month and I use it for 12 month that year that otherwise the half year method will work for that software three 3 years or 36 months but so now this is copied and entered on the spreadsheet you can see you want to R this um yeah so automatically the spreadsheet will use the the rates and calculate the depreciation deduction for each one of those years that the asset will be depreciated for and when you see that is taking the rates times the original amount the basis for depreciation and the following year is going to do the same take the the the basis for depreciation when you place the asset in service times the second year rate the basis for depreciation is now going to change because the rate is changing so the third year is going to take that same depreciation basis for depreciation amount times the 30d year rate and so forth and when it's well done that one 14 should be fully depreciated within six year 6 years 11448 so you will summarize everything you sum everything to see if it to that original amount if it didn't if it does not then something is wrong somewhere but that's the way it works this method when the rate is for every year you use the the amount the original amount that you are depreciating the cost if it's fully 100% um business use and you didn't take any other depreciate uh special depreciation of session 179 if you did those needs to be taken out of it to find a basis for depreciation and that bis for depreciation is what you are going to use term year one rate to find the deduction for year one THS and that same basic for depreciation THS year two rate to F year two depreciation deduction and so forth and now doing that we know how much the depreciation will be for the first year so and again everything is five year so doing it by hand we do not want to congregate everything therefore they are going to go on different form forms 45 CC two but then we'll keep one that will be the sum of all those forms so we are going to keep the one that has that we have lar C for we are going to keep it and we are going to complete this one [Music] for we are going to add different forms so now that we are doing that let's not forget line 17 we'll come back to it so let's save it and let's take this number no let's go back to our form and I'm going to copy and paste and we just going to use this as a copy one and I'm going to close this one we will come back to it and I'm going to CL this as well we are going to close this one and we will open the first the first one so this one we are not going to have any number or Lin SE and we are going to complete because we have multiple five years we are going to complete it for that so we are going to for the first one let's see here the first one 397 we are going to use four so that is five year property so that will be session part three session B so that will be five year property and basis for depreciation is four and before I put the number let's put this one recovery period is five the convention is a half year here and the method is straight line so let's save that in fact we should be able to do this on the first on the original one as well so that we have two so what I'm going to do is let's open the original one that will have the summary of everything and let's put one on it so it's going to be recovery five convention a half year method straight line this one will be four and the depreciation amount excuse me I'm going to put one because I know that I will have round in issue so I'm going to put one for this one you can put zero as well but I'm going to put one okay so and I will save it and close this one so the second one that we are working on I'm going to make a copy of this one we can just call it template and the amount is 1 114 114 the depreciation total is going to be 11 11 and we will save so this one will just have those depreciation on it with the top of the business name activity type and will be on it because you only have one row for 5 year properly if you are not going to aggregate if you not going to combine them group them you do not check that b if you want to group them since we all are 5 year properly if you click that you can just put the toal the total for all those asset that have the same recovery period the same convention and the same depreciation method you can group them and since our our has all three we could technically group them and put a Toro by Toro I'm talking about the toal cost and the toal depreciation for that year we can just put that on one row for it but I do not want to group and if you do not want to group then you'll have multiple rows uh multiple form because you only have one row for per properly year per form so we are going to close this one and open a second one for the third asset for the four asset probably we might need those so and let's open this one and that will be for 535 and we look put 535 and the depreciation deduction will be 54 we will save it and we will close it and we will open another one is 32 and the depreciation is three we will save it and we will close it we will open another one so if you claim session 179 you will file this form 45 C2 if you didn't claim session 179 but you depreciate and you place ass set in service during the first year you'll file this form for5 cc2 and cc4 and C C4 and C we will save it and we will close it now we will go to the original one we have L for the are um intangible asset other [Music] than 97 intangible we have part three line 17 for depreciable deduction depreciation deduction for asset place in service in Prior tax year line 17 so if your business is New Star in 20123 or so for the start of the year you are filing for then you won't have anything for L 17 but if your business is not new and you have asset place in service prior year that you have been depreciating it will go online 17 so we will go to the preciation worksheet and and by the way if you are looking for a a worksheet to track your asset you don't have time to design your own and you're not using a a software to track it you can find this depreciation worksheet and it has Aion for um amortization as well you can find it at Liber downlo.com we have few options to choose from but the one that I'm using in this example is similar to this one depreciation and amortization worksheet ld22 D1 but we do have few to choose from as well and I believe this one um may not have amortization in it this one may not have amortization but has multiple type of assets that can be depreciable this one is um for asset other than real EST real estate and vehicle is not suitable for it the bottom one is more suitable for that one but again you can check it to see which one if you want something like that and um this um summary worksheet does not come with the templates the one that I just show you I li download is just the one that will allow you to track your assets and calculate the depreciation as well for them and having the depreciation when you use the publication nine for re and the instruction for form 4562 when you calculate the depreciation deduction it is s and you just every year that you are fing taxes you know how much your depreciation for that year is going to be is say if you you know you you Contin using the asset those are set so you and you yeah you can have that in your record as well so it's good thing to track your depreciable asset if you are depreciating them if you are expensing a claiming session 179 it's good to track your assets but then you don't need to calculate depreciation every year for it since you already expensive so for that we will go to the for the prior year the work sheet T to works for me better and then I will work with the number that I have here and I need to make sure placing service in Prior year so 542 we'll go back to our things here we going to use 542 okay and we are not going to check that because we are not going to group anything we already have line five line 19 B for Section B part three depreciation for business asset place in service during the TX year we are filing for completed we'll scroll down to the summary and we'll just complete the summary on one form so list a property we do not have list a property is below so we are going to leave that alone add line line 22 Toro add a more from line 12 14 and 17 so line 12 is the session 79 1417 what by 14 17 and 20 oh okay line 14 through 17 that makes sense line 14 through 17 for special depreciation we'll take our star software in this one and then 19 and 20 line 19 and 20 okay so now that we know what we need to sum we'll take our calculator because uh the t software the way I adjust it for this example I took 12 month instead of six month my number is going to be a little bit different from the spreadsheet so I'm going to use 35 + 542 plus okay I'm going to write it down is 577 and now we are going to go and summarize those so we have one on here plus okay it's just doing it for us already so let's go and let's click on this one and it's good to check your number to make sure you type them well plus 11 plus and I'm going to close this one so that I can open the second one 54 and we will close it and open the next one let see here plus three and we will close it plus six 652 so we will go to and that's 652 is little bit different from here because of that 17 um this um let's go back this amount here the half of that is 17 something so if we go back and we do EO uhoh shouldn't have done that okay 348 / 2 for half for 6 month for half year soal 3498 / 2 so if we take if I just do EO this one plus this one you can see it's 6 6 52 yeah 652 so that 652 will go to our which I believe is our calculator 652 it will go on line 22 652 and you'll keep in mind if you have line 12 in the Toro session 179 you want to be careful this tooro 22 will not go on form 1065 or form 1120s you'll have to take the amount that is related to line 12 session 179 you need to take it out of it and put it on schedule K the software will do atically split take line 22 amount put it on schedule k for you and put the depreciation amount on the depreciation row but if you are but in your draft that you are doing the depreciation amount which is part two and part three will go on the depreciation line either on form 825 for rental property or on form 1120s or on form 1065 so now we will continue total assets shown above and place in service during the current year okay hold on for assets shown above and place in service during the current year enter the portion of the basis attri okay so we leave that alone if it does not matter it and if you have a vehicle plac in service you have PA five to complete and then you have amortization an amortization if you have an amorti amortizable asset to to amortize you'll go to the instructions for form 94562 and bra yourself I'm going to scroll a little bit fast we'll go to the amortization section it's good to know the code for the type of intend asset you want to amortize and each they have session that you'll have to use and and we can continue further down to see session 97 intangible so they have uh startup an organization for 180 month to depreciate as well and it has some code that you will have to use if you didn't expense the if you start the business the first year you start the business you have the choice to claim up to certain point for startup cost and organizational cost if you pass that amount I don't know the amounts in top of my head but I think it's around 5,000 but you have to do your own research on that anything above the threshold you'll amortize it and you'll amortize it for 180 month using the appropriate code for it and setting session 197 in they have the Le surve for you to to see what CL CI as a session 179 and for how how long you amortize it it is 15 years 180 month and they have code for it so session 197 is a code so you'll add that code so if we go back to the amortization um section I believe this one might be okay hold on I hope I didn't put the summary on the wrong one yes I did okay so let's say this is 52 out of here and let's save it and close it the summary is going to be on one page and I like to put on the page that I complete other rows other yeah rows on so 652 okay and we will I will on that same one I will P the amortization amount as well so if you are amortizing if you place Assets in service that year you'll put the the assets description the date you place in service the amount you pay for it the code that I just show you from the instructions for form 4562 and the amortization period of percentage and amortization deduction for the year and as an example I can just show you on the spreadsheet what I tried to amortise here which was a software that I could just have used that L Dee for 36 month is just the same as amortization but it's just not appropriate for amortization session since it does not have a code they call it other than 197 intangible even though it's an intangible asset so what you'll do for your intangible asset though is for the amortization period you'll put how long they say to amortize it for the s for the 197 intangible they say 180 month so you'll put 180 for instance or the percentage and then the amortization period 180 month so what you'll do is for the first year you will see when you place it in service and here in this example though placing in service close to the end of November that mean we only use it for one month therefore that's one and in the case you have 180 month then that will be 1 / 180 that will give you a rate so the second year is going to be 12 / 180 and you'll be doing that and you'll have that 15 years is colon and the and then the the the amortization the do will calculate based on those rate that you did but just make sure that when you toal your rates it gives you 100% And you can n colons to it don't know what I'm yeah I did this up to eight here but you can add more colum as well and then calculate the things and then the way is going to calculate the deduction for you though is going to take that same amount am amount times the first year rate that same amable amount times the second year rate to find the second year amortization deduction so if I click on the first year it's taking the first year rate times that amount the second year deduction is taking the second year R STS the same amount amount the original one and the third year deduction is taking the third year rate times the same amount amount that amount is not changing it's just a rate that is changing if so and the toal deductor should match the amtis amount that's how you know you did it right and every year you just know the amount you need to go put on your form and again using a t software it'll be able to um track that for you as well if you're using the same Ty software every year you'll pull the right year amount to to to have but it's good to have a record of those asset and how you amortise them or depreciate them so we have anything place in service during the year we are filing for therefore we'll go to L 43 amotization and cost that began before 2023 ta year and we'll go to our mation form and that will be 2023 that will be 13 so we will go and put 13 on that line 133 total amount that will be L 42 and L 43 colum F and that will be 13 but if you place asset in service during the year amortization deduction will be col F you will toal that plus anything youing from prior year that is on line 43 and that will give you line 44 so this line 44 will go on if we take form 11 20 S for S corporation tax return it will go on an attach form and it will go on line 20 other deduction and if we go to our we we'll open the bookkeeping no not the bookkeeping Let's Open schedule L attachment so because anything that will say anything that go under other deduction because you don't have any specific line for it you need to attach a statement for it so amortization will go on other deduction line and therefore line 20 for form 1120s and we can see amotization online on on on that attachment so it is a part of the am so if you are filing from 10 C5 the amortization will go online 21 other deduction and since you you might have other expenses that will go on that line you need to add an attachment to it and again it will be included in the list of expenses that will go on that line amortization so now the depreciation 64 652 line 22 the depreciation amount if you are filing from 1120s you will go on line 14 you'll go on that line 14 if you didn't put any in on form 1125 a and if you have session 179 in that total you need to take it out of that total you will go on schedule key line 11 if you are filing form 1065 the total depreciation deduction for 1065 you'll put it on 10 C5 l c a and then any that you put on form 1125 a you will put it on L 16 B and then you do the deduction of the two to put it on line C C and again the the amortization will be on an attachment and the total will go on line 21 other deduction and since we might have some expenses that are not L here we will not put that 13 on line 21 other deduction for amotization it will be a part of the attachment so that we can put the toal on line so that is how you depreciate business asset under G DS if you are not claiming session 179 thank you so now that we have the depreciation down let's move to the next de retirement plan if you have it then you will complete it otherwise you will continue uh employ benefit program energy efficient other deduction so other deduction we will go to our expenses and we have this one here so you can see that there are some uh expenses that we don't have a specific line for it so we are just going to copy is going to be 18 AD that include the amortization as well so 1880 and you'll add an attachment to your form and the software should be a to give you uh option to to state your own type of expenses worldwide and the amount and then add that attachment to it for you total deduction so now the total deduction we are going to use the calculator start with 200 + 139 + 652 + 1880 and we have 28 71 2871 ordinary income or loss so we will take the gross profit minus uh line H minus line 22 so I'm going to do 1643 minus 2871 and we have1 2281 2 2 it assuming we have our things correct here let but you get the point maybe a few dollars off but yeah so TX and payment so there are some Tas area here if anything here is Rel to your business you read about it and you complet it otherwise I'm going to move forward so by default LL does not pay T is flow to the partners but there are some instances that you might have to pay T so when you are fing for your own business you can just say no so that you know IR contact you yourself so when you print a document out you will sign it and you'll put your date the date you sign other information 10 CC from 65 schedule B other information so what type of entity is following this return is an NLC domestic liability limited liability company at the end of the year did any foreign or domestic domestic Corporation partnership um own 15 50% or more of this partnership okay so no so we'll take no so you'll read the question and you'll answer did any individual or estate own an interest of 50 % or more yes so if yes you'll attach schedule B one so we will go look for schedule B1 and schedule B one has two part and I believe the bottom part is where will be need did is the bottom part is for individual owning the business so you'll put the partner's name and I'm just going to put P1 for partner one you'll put the partner's name you'll put the partner SSN you'll put the partner um us and you'll put uh the ownership I'm just going to put 50% mp2 for the partner 2 ssn2 leing in and from the USA 50% and that that's it and again it should come you some instruction for you to read through it to see how to do it and I'm going to save it and close out of that and it is going to be attached to the form and this one we can save it and close it and since we are done with this one we can save it and close it we close this one as well not sure what I have that there but so that is done at the end of the the depart partnership ow 20% or more of any other corporation on foreign the other is no if is yes then you will complete the bottom table own directly an interest of 20 or more directly or indirectly an interest of 50 or more in any other domestic or foreign partnership no okay so does the partnership satisfy all four of the following the partnership Toro receipt for the T year were less than 250 yes the partnership Toro asset at the end of the T year were less than 1 million yes schedule K1 are filed with the return and furnish to the partner on or before the due date yes the partnership is not fing and is not required to file schedule M3 yes if yes for all of those then the partnership is not required to complete schedule L M1 M2 item F and item L on schedule K1 so therefore total assets is not required to complete that item F and item L on schedule K1 is not required item L although it's good to track that for your own record as well well good let's scroll down so we are going to put yes is the partnership publicly traded no during the T did the partner has a debt no cancel no did the pass part partnership file or require to file at n 18 no at any time during the calendar year did the partners have an interest inure in now at any time during the year did the partnership receive a distribution form or the grer of no is the partnership making or has privately made on revoke ex 754 now okay for this year did the partnership make an an optional basis adjustment no for this TX year did the partners make any option basic adjustment no for this year this the partnership require to adjust the basis of partnership no properly no check the bus if during the um current year the part any property receive no at any time during the T year the partnership distribute to any partner no did the partnership is required to file Ada 8 no did the partnership has a foreign partner no if you do there is a form you might have to complete and add numbers here enter the number of form a the ACC 5 no did the did you make any p payent that will require to file $10.99 no if the answer is yes you click yes and you file on time you click yes into the number of partner no we don't have that during the partnership did the partner make any payment that requ to file 1042 no was the partnership a a specifi domain entity re to file a no is the partnership a session 7 21 during the T did the partnership pay or AC any interest or roal for which one or more partner are not allowed a deduction no did the partnership had an election under C3 now but again if you do you want to read instruction um does the partnership satisfy one or more of the following the partnership own a pass entity with current op your carryover the partnership agre average annual gross receipt of 20 million the partnership is a t shelter if yes to any 8980 form is required the answer is no is the partnership attaching 996 no uh enter the number of foreign partner no at any time during the tax year where any of the any transfer between partnership and his part subject to disclosure requirement no since 201 17 did a foreign company directly or indirectly accur suspension um no is the partnership required to file 720a no schedule B continued B under the cover surrogate foreign corporation rule no at any time during the tax year did the partnership receive or reward award payment for property sale exchange otherwise disos of digital asset fincial interest in digital asset well I only read about that I'm going to say no is the partnership elting out of the centralized partnership added no if yes the partnership is complete schedule B2 from 1065 if no complete the destination things at the bottom and so here you'll put your name so we are going to put I don't know you can put name you put your address and you'll put your phone number but if your your um partnership representative is a business then you'll complete the business portion instead but if it's you one of the partner one of the member you you you complete the top part with your name in yeah and the phone number session and this will conclude part one and schedule B of form 10 1065 so how do you complete schedule K form 1065 so line one or uh yeah line one original business income loss from page one we'll go to page one line 23 and I believe is what negative 1228 line two rental income or loss we leave it alone line three we leave it alone so pretty much we are going to scroll through and we discussed those earlier so interest income will go online five if the business earn some interest dividend income will go on line C for original dividend for qualifying dividend we will go to L CB and l c c for dividend equivalent and royality will go on line seven those are the income here so while we are talking we can just continue so and then you have some other sessions and then you have other income you can see the instruction for that and we go to the expenses session so session 179 if you have that you will GoLine 12 we talk about cash distribution non-cast distribution inventory and investment interest expense will go there and that and then you have other deduction line 13 e so let's go to the instruction I think we are a little bit are we okay let me see here let me scroll it a little bit further down so portfolio income don't reduce portfolio income by deducing alloc so deduction will go on line 13 e of schedule K report each partner share of that on their schedule K1 using code I or L interest expenses alloc allocable to portfolio income is gener investment interest expense report on schedule K line3 C so if you have income on line 13c no um those expenses Will Go On on schedule k l 13c so report each partner share of those expenses on bus 13 schedule K1 using code H but interest income so interest income they are all interest Source accept tax exempt and so forth so I'm not going to but it will go on line 13 C that will be the interest income and online 13 e will be other portfolio income and portfolio income will include royality so I will expect them to talk a little bit about rity but let's continue to the expense session since they are talking about okay so rity we we saw it pass the income session enter the the rity rity that's the income here so and let's go check 13 so then 13 c yeah you can see the top of investment income in interest that will go um investment income will go online 202 B respectively so it is now but anyway so include in this line the interest property allocated to debts on property health for investment purposes property health for investment include properly that produce income unless derive in the originary cost of a trade or business from interet dividend Ann ority and gain from the disposition of the property that produce those type of income and is held for investment investment investment interest expense doesn't include interest expense allocated to a passive activity so other deduction 13e inter deduction now included on line 12 13 a 13 B 13 C 13 D2 and line 21 on the line to the left of the entry space to identify the top of deduction if there is more uh ATT attachment might be provided to specify that and you go on schedule K1 with the appropriate code for unschedule K1 you use code I for the royality income expense related and and then the have pretty much going on here so royality expense Rel to royality will go on line 13e so if we go back the rity income will go on line seven of schedule K and the expense rate rity will go on line 13 e deduction and you can just dep that's the only things okay line 14 self employment net earning loss from self-employment so in this area though in the example that we are using that we have two partner and we assume both are working in the business what net earning or loss from self-employment mean is just that out of the income out of the profit or loss that you have you will make sure there is no income from passive activity included in it you want in uh profit or loss from a trade or business activity active activity generated in uh profit or loss and you you and you wanted to know out of the partners that own the business which one works in it but participate and which one didn't so the one that Mally participate in it they will pay self apply task like Medicare and Social Security and income tax on their share of that income and the one that didn't participate in it is now they don't really owe a self-employment in in my understanding in this example when we say those two people that own that own this business named top of LLC we will put the full loss here and we have that loss on l one of schedule K so that'll be -12 28 28 so pretty much the amount of the profit that is subject to self employment that's why you report there and they say l 14 B gross farming or fishing income and line 14 C gross nonfarm income so nonfarm income it will be the income from page one 1643 the gross proit or line a so I'm going to 1643 when you using the software it's just going to put those number where they needs to go you are not going to keep repeating those numbers and the instruction will give will guide you explain it to you how you should complete that section or if the software is asking you some question that you do not have a good answer for you can rely on the instruction to read it through if the partnerhip is an option dealer or a commodity dealer you can see that before you do it so and there is a worksheet as well so if the and so let's here if the partnership is engaged solely in the operation of a group investment program earning from the operation self employment earning for either general or limited partner so General partner General partner net earning loss from self-employment don't include the following even for General partner they are considered General partner when they are the they are managing the business so even for those partner you have to make sure the passive income is not included in it so the net earning or L subject to self-employment does not include dividend on any share of stock and interest of any bond unless the dividend or interest are received in the course of a trade or business such as dealer in stocks or Securities or interest in not or account receivable rental from real estate except rental for of real estate help for self to customer in the course of a trade or business as real estate dealer or payment from home or space when significant service are provided Ro to income expect accept rity income received in the course of a trade or business so you can read through it to see what to exclude so and then they have um limited partner generally a limited partner share of partnership in income or loss isn't included in earning loss from self-employment limit a partner Tre treat at self employment earning only guaranteed payment for services they actually rendered to or on behalf of the partnership to the extent that those payment are payment for those services so that's the only case you you put those for them so how however whether a partner qualify as a limited partner for purpose of self employment T depend on whether the partner met the definition of a limited partner under session 1402 and if you copy session 1402 and search it on Google should be able to find the Tas Law related to it and read about it and then you have that so and use the worksheet below to to calculate the amount schedule K1 don't complete this land for any partner that is in an estate um a corporation or organization or an IRA so but that is the worksheet that you'll be able to complete and determine what will go online 14 a and you can see they include each General Partners share and each partner share of line C in BS 14 schedule K1 using Code a so s line line 4 B from line 4 a so line for a is guaranteed payment to partner Limited and general or whatever they and of line a allocated to limited partners is this one so they are taking 4 A minus 4 B to find 4 C and then they have um line three that is include each general partnership of line C on schedule k 14 did you shower good job come here love you I'm recording everybody shower okay okay now go up I'm recording you guys can start using the computer and start schedule who is showering when that person is shower you guys can start okay okay so yeah and you just read through it it work you way to remind you of what will go in there again if you are using a software you should do that so you can see that on the first one is asking you to put schedule K one number which is that 1228 any n income loss from certain rental property instructions and N rental for schedule B so pretty much the income side of schedule B some some of those income are getting included um income portion of schedule K some of those income are getting included so net loss from form 90 4797 by 2 is getting included so you'll combine line one to the net gain from form 97 4797 2 line 7 included so you add it back you out of it part of line 3 a alloc to limit A Partners you'll add it and then you'll SRA from line 3 b line 3 a if line 3B is a loss reduce the loss on line 3 a by the amount line 3B so include each General partn share of line 3 C which is line 3 Aus line 3 B you'll put that online on schedule K boss for on schedule K1 bus 14 with code a and then they continue um they continue that so okay so let's assume that in our case both uh partner work in the business they are General partners and that's the only number we have on here we will put it on on 14a so 14 C if we go back to the instruction It Go on schedule K1 wee C so in on 14c the partnership gross nonfarm income from self-employment nonform income from self-employment individual partner Partners needs this amount to figure the net income from self-employment under the nonfarm optional method of schedule SE form 1040 part two enter each individual partner share of share in box 14 of schedule K1 using Code C and then they yeah well okay and I think they have some instructions for the worksheet contining all the way there also but yeah so now that we have that figure out we'll go to credit so you can ret through the credit to see if you have some credit there that you can claim I'm going to skip over it for schedule K2 is for international foreign we are going to leave that alone alternative um minimum task again if you using a Tas soft where you'll be able to determine if something that needs to be calcul um completed other information so under information you have a tax exempt interest income other tax exemp income nondeductible expense we are going to put 140 here and because we do have 140 in our at this point I think I can close the depreciation spread sheet and open the bookkeeping okay I think he did already okay so I think there is nondeductible expense 140 you'll enter the line 198 distribution of cash and mro security distribution of other property you can read through that matter to your business line 20 a investment income line 20b investment expenses line 20c other income and amount attached so this will be related to Q qbi qualifi business interest um but yeah let's just assume so qbi on schedule K though you are not going to enter anything there but schedule K1 you will do things there so and then line 21 toal foreign ta pay or AC so we'll come back to line 20 C so analysis of net income loss and return so we are going to use limited partner and I'm going to assume both partner are active in the business therefore we will put 1228 there but again it'll be a good idea to read it when you using a t software depend on how you are manipulating the partnership schedule K1 information data is going to affect where the numbers will go whether it is passive or active the instruction though is little bit on the confusing side for me I don't let's see if we be able to find the sorry if it's little bit Bome to scroll this way okay page 58 analysis of net income loss per return report all amount for LLC members on the line for limited partner since we are filing for an NLC they say to use limited partners line so they continue and say that classify as passive all limited partners in a partnership whose principal activity is a trade or business or rental activity it's kind of confusing so if they want all LLC members to be considered as and to be considered as limited partner by putting their numbers on limited partner line if those members actively materially part participate in the business saying to put um their numbers on underneath passive I kind of found a little bit weird I know that by default limit A Partners mean they didn't work in the business did her partner did but then when they said to put all llam members as limited partners and then they said to um put uh uh to classify them as passive is little bit confusing are they talking about limit a partner that isn't work in the business so it's just you can read it through and decide for your business so now he say here that in classifying partner who are active who are individual as active or passive the partnership should apply the rule Below in applying those rule a partners ship should classify each partner to the best of it a knowledge and belief it is assumed that in most cases the level of particular Partners participation in an activity will be apparent if the partnership principle activity is a trade of business classify a general partner as active if the partner materially participated in all the partnership trade or business activities otherwise classifi the general partner as passive and but then they and then they say classify all LLC members as limited partners so using a partnership T return to file for LLC and partnership I don't know if you had to we have to make a distinction here but by considering it as partners that work in the b in the business as active so in these things though I assume so all LLC will go under limited partner session as instructed and based on their participation the business I'll choose whether it is active or passive and since in this example we assume both participating the business I'm going to choose active and put the amount there but again that is my thought on that and then we have the balance sheet that we are not rec to file we have schedule M1 that we not record to file and we have schedule M2 that we are not required to file this conclude how to file form 10 cc5 and schedule k for 202 3 how to file schedule K1 form 1065 for 2023 so when you use the t software to file your return by the time you are done completing 1065 and schedule K you'll have a lot of information on your schedule K1 but you still need to go check so you want to make sure your business re identification number that we are using this example is on schedule K1 so make sure yours is accurate your business name automatically the software will pull it to your schedule K1 you are now going to type it again and for your state 1065 the schedule the t software will automatically send information to your your State schedule 1065 and your state 10 65 schedule one as schedule ones as well therefore you are not going to reduplicate the information that you already put somewhere on any of those phones that will save you some time and of course it will cost you some money but it's still going to be less if you are fing it yourself compared to somebody else is doing it for you so if your business is now complicated is new you'll be able to follow yourself use a t software and IR sent a where um partnership file return if it is if you are going to e you'll just put online the software will do it for you if you print it out a melee it will be otherwise we can go to the instruction and go to where to ma the return and you can see where it's going and in this example it's going to be Ogden okay D check if this is a public literate no again if you have two partner in your business you'll have two schedule K one the sum of schedule K1 numbers will match your schedule K respective lines or box so in this example we are going to have two schedule K1 therefore I'm not going to complete oh since I'm not putting that much of information in it I'm going to just do it so the first one is going to be SSN one for the Social Security and this the name is going to be partner one so we are going to choose limited partner or other okay so you have General partner or LLC member manage and then you have limited partner or other LLC members and technically huh limit the partners that are now working in the business that's what I like to check that BS for and LLC members that are working in the business managing the business check this boss G for it but again it's going to affect um how your schedule one will be completed um let's I think let me see here I'm going to go little up here to see if we have more information on it okay complete item on all of schedule K one if a partner whole interest has both a general and limit a partner check both bosses and attach a statement for each activity that show the amount allocated to the partner's interest as a limited partner okay well I will assume I will suggest you use your best judgment on the but by default in my understanding limited partner means they are not working in the business in general partner means they are working in the business LLC or other or partnership but yeah I'm a little conflicted choosing that one the best scenario will be to choose both though but anyway the reason why it's confusing is because of what they say on page 50 I believe so saying to related to um the net income activities to use the limited partner for all LLC members is what makes it confusing for me so don't call me on this one because I'm a little bit confused on both I do have 10 C5 for a business of ours but is a passive type of business therefore in fact two of them therefore is easier to just check the limited partner on it okay so and let's see what else do we have here that and what type of entity is this partner so you'll put in the visual so Partnership of profit loss and capital assuming it's just the same it didn't change we'll put 50% beginning ending if there is a loss it will be the same based on that that you'll distribute the profit or the loss of the business so and there is no decrease so we are going to keep it like that and and we do not have anything for we don't need to complete this session if it's not related to us schedule K2 schedule K3 uh boss we don't need to complete we are not required to complete so we are going to leave it did the partner contribute properly no and partn share of realize we leave it alone and we'll go to box one so B one is going to be to take um schedule K1 so pretty much we'll go back to schedule K1 to make it easier for you to understand every Lear of those schedule K has their comp comp uh corresponding boxes on schedule K1 so line line one of schedule K we will divide that in two because each partner has 50% ownership and we'll put it on schedule K1 so I'm going to pull my try calculator out and 1228 / 2 50% is netive 614 we do not have anything on line two of um the the um schedule K therefore I'm going to just go through it and we have something on 14 a and 14 C so you are going to go through it you can see they are just the same compared to schedule K but on schedule K1 they have boxes that you are going to uh put code on and we will go to we put code on some of them so 14 and we are going to P code a and we will put 614 uhoh 614 and we will put code C and we will put what that amount the income we will put 1643 / 2 and again what I'm doing is 1643 * 0.5 like 50% ownership so if I go back one will be like this because I'm rounding and let's see where where we have numbers on 18 c that will be 70 right so 18 c 7 so we need to go find the code for that one and bl yourself I'm going to scroll little bit um fast 18 c concern using Code AC to attach a statement to schedule K1 okay so we are since it's 18 c we are going to use code C because line 18 has a b c so uh yeah so we will use C code C and we'll go back to schedule okay and we have 20 c as well we don't have any information here because we'll add an attachment but 20 C we will use code let's go check because it's Q qbi um and is related to other information 199 a I believe so section 199a information code Z so they say that use Z asies on each partner schedule K and put St Mt in the dollar amount space therefore you'll add an attachment to specify so pretty much what if the is qbi oh is now interest is income so qualify business income so the way it works is from your 10 C5 you'll put information like the profit or the loss if you have emply you have W2 wages and depreciable asset a portion of it will go will go on that worksheet to be able to determine the qbi so we will have Z ASAS and then we'll put stmt I got it right here and then we'll use an as for it we'll use an attachment and that attachment will have the detail information and the detail information will include um let's go to the worksheet I'm not going to trable and then you can read through it and while you add it if you have a rental real estate so rental real estate May constitute a trade or a business for purpose of qbi deduction if the rental real estate Rises to the level of a t of business under Section 162 satisfy the requirement of the rental real estate safe hardboard meet the S rental exception and with the determination of whether a rental real estate constitute a trade or a business for purpose of the QB deduction is made by the partnership so the partnership might first make this determination and then only include the distributive share of the rental real estate item income gain loss deduction from a trade of business on a statement provided to the partners so rento realiz that doesn't mean any of the condition nor above doesn't constitute a trade or business for purpose of qbi deduction and has not be included in the qbr information provided to the partners so since this one does not have um real estate in it there is something we want to put as well if you P your information on page one of 1065 and your business is a trade business activity or service you might want to read about the sstb session so sstb excluded from qualifi trade or business sstb are generally excluded from the definition of qualified trade or business and sstb is any trade or business providing services in the field of health law accounting AR science performing art Consulting athletic Financial Services brokage Services investing and Investment Management trading or dealing in Securities partnership interest or commod or any other trade or business where the principal asset is the reputation or skill of one or more of its employees or owners the term any trade or business where the principal asset is the reputation or skills of one of more of its employees or owners mean any trade or business that consists of a trade or business in which a person receives fees compensation or other income from endorsing product or Services a trade or business in which a person licenses or receives fees compensation or other income for the use of an individual's image likess name signature Voice or trademark or any other symbol associated with the individual Identity or C receiving fees compensation or other income for appearing at an event or on radio television or other media for mon so partnership might separate separately report keep your information for all trade or businesses engaged in by the partnership including sstb but must identify which trade or business are sstb so that is that so it's very important to understand because the CIA is for the partners to be able to see if there is a um credit or deduction of that they can claim on the 1040 so it's good to um you know understand that and pretty much the information that go on the qbi is those and we are going to and they say now to aggregate trade and service together so that is the the they have a flure here to help to guide you but then they have they should have a worksheet so they say that the sstb or PTP can be aggregated yes the W2 are amount PID to employees described in section 6051 if the partnership condom more than one TR of business he must allocate the W2 amount among his of businesses so they just a basis I don't know if you notice it that is the asset not too far those are pretty much things that would be the qbi so you have the income or loss from your 1065 that 1228 for instance you have the W2 and you have the assets portion so those three might be more common to see as well and the PTP they'll be able to explain it as well as we go down what the PTP is not going to go through the then I'm going to go to the just a basis of qualified property is figured by adding the just a basis of all qualified asset in immediately after accusation qualified property include all tangible property subject to depreciation under Section 167 for which the depreciable period hasn't ended that is held and used by the trade or business during the T year and held on the last day of the T year the depreciable period ends on the later of 10 years after the property is placed in service this or the last day of the full year for the applicable recovery period under SE one CCA again it's good to use the task software to file the return and the task software should be able to know how to classify those things for for you but then they have you know those so if you go through that statement one for instance will be can be used and this one you use that for the schedule K itself and then you'll have schedule K ones for each uh you'll have a version for each schedule K1 so that's why you'll have the partnership name partner name share of the partner so anything that this segment a for schedule K will be divided will you'll put the partner portion of it on that Partners state statement a qbi statement so and if you didn't Agate anything you you want check it if your business is a service then you check that sstb but they try to have multiple type of business here if you have multiple activities together that you conduct under one LL see so the ordinary business income in this example though that we have our income if we go back to our 1065 or schedule K one will work to L One schedule schedule K line one or original business income line 23 1228 when you take that for the partner that will be half of that so that will be uh that's 614 negative so for the partner that would be that negative 64 and then the W2 but then you see there are other things that they are asking about as well and then you have W2 and the W2 is 200 therefore the partner will be 100 that will go there and then you have the property qualifi property and the S will be a to find the Thee the assets the portion of the asset value that will go there so they qualify properly they just just a basis uh for the business asset that will go there and do that for each schedule K1 and that attachment will be added to your schedule K1 for line 20 with code Z style and I think and we and this one we can save it and then we can create the second one for and that conclude One schedule K one now we can pretty much because they are 50% ownership each we will create a second one for the again partner so partner two everything else will remain the same and we will save it as partner two why not now we have both so when you take both you toal each line it should match the corresponding line on schedule K 10 C5 so now that we did that let's open one completed with uh one completed that we can we can use to see the attachment to schedule uh the attachment for the qbi and and this one is completed using a t software so the numbers might be a little bit different so let's see the cost of good the rounding here is a little bit different so 1643 that we have 1642 okay the depreciation I think we have 42 so yeah okay so those $2 amount can affect the ending result we have 28 negative I believe 28 like 1228 instead of 1230 okay but it's not really why we are here for so let's continue Angelic those kids I she's not going to do laundry while I'm recording but anyway so yeah so let's continue here so that is 14 a and 14 C let's scroll quickly okay and we have that uh nonble and you can see that that line by default is now um there is a line that I didn't complete on 1065 let's go back to our schedule okay was it schedule okay yeah no that will be at the end of schedule okay that is this line here so net income or loss so you combine schedule K1 Angel hey who is in the basement open them the the washing machine and tell that she's not going to do I'm recording what open the machine the the lundry machine please thank you and let your sister know that the laury is not getting done just yet yeah I'll do that when I come up you guys can start using your schedule Gabrielle I'm recording I'm not going to come your head just yet those kids net income loss combine schedule Line 1 through 11 Line 1 through 11 and from that SRA line 12 through 13 and 21 Line 1 through 11 and from that you SRA line 12 through 13 we don't have anything there and 21 so we have 12 28 negative and they say 21 okay so we are going to put 28 there yeah we missed that line okay and yeah they put it on D let's continue yeah this one was have $1 up there excuse me schedule B one and then we have the partners so the partners here you missed that one as well let's check our schedule here schedule K1 depend on the question that you answer the software will be a to check the right box for you but it's good to to look through it so domestic part partner and foreign partner so for LLC living in the US owned by us the partner is it domestic partner it is so you will check that so we need to do that for the other one as well if I go back to the partner we will check that for the partner as well one my children don't see me for a while while they know that I'm at home I'm not working yeah they usually like to be where I am or they'll start acting up in a way to bring me to them so I think they getting to that point so domestic partner so that is selected individual we have that they are 50% 50% so when we go back up let's go down a little bit okay and when we go up they p is because they will attach a statement and so in the breakdown for 14 with code A and C have that and then we'll go to 18 c like 70 and then line 20 excuse me Z Star we go to the qbi so qbi for part partner one you can see is using the portion the partners portion of the the loss or originary income or loss is using the W2 half of it and then the portion of the asset that the justify qualify for the property um the Ubi the partner portion and this down and and and the qbi is this statement a that is completed and then we'll go to the attachment so the ass they have on on the they have n just go back then they have the attachment to specify that that income is a nonp passive originary income included in line one that is that amount so that so they'll have that for both Partners so this you can see for 50/50 will throw to 100 so the ownership should not be more than 100 the partner is 100% the yeah the yeah the partnership is 100% the partners ownership toal will toal to 100 so if it's just you that you F in 1065 you'll be fing schedule see but if it's two members or more you'll file 1065 unless you request to to be t as 11 as es and F 1120s so if you fing 1065 the number of partners that you have the ownership should throw to 100 when you throw all of them so this one is partner two and then because 50 50 that entry will still be the same as the previous one that we saw and the to that part two person will be that there is something I was saying before when I was doing this one partner because I I 50% of this number was there and the other one will be two because again it needs to toal to the full amount and yeah that's why because we use 1643 * 50% to find that number if I'm using this then I need to use this to find the full amount that was on schedule k 14 C the full amount so those are things to consider the software will do automatically for you and and but if the number is you know is divisible uh like based on the partners the number of partners that you have the ownership that you have you may not have to deal with those decimal point but then we have that and the attachment to that partner and then we have the depreciation that we go through and the supporting document so I try to just put them all together so have that and then the qbi for the LLC itself which will be the from which will be the to that is used to split between the partners that we come across that will have the full original loss uh in income the W2 and the just a business asset basis of depreciation yeah thank you so much for watching I'm a li Consul LLC YouTube Chann and.com our blog we thank you very much for watching our videos we thank you very much for your your time and thank you very much you all that subscribe to our Channel there is something I didn't point out though is where to mail your 10 C5 so if you want to paper mail it just you might want to read the requirement for electronic filing if there are other task form that you file including W2 um employment T unemployment task if you file um if you have more 10 or more returns to file you might be required to file your 1065 electronically other than that if you have 100 Partners or more more than yeah you might be required to file electronically but other than that if you um that does not concern you and you you can still file it uh electronically but if you want to paper file the instruction the software should be able to direct you but it's good to direct with the instruction as well find the set your business is located in and based on the toal asset of your business on your 10 C5 here we don't have anything there you'll find the where you will mail the address that correspond to your state based on the the asset and for a for instance any amount is going to out therefore that's where that will go that's where that will be mailed to and you m it VI USPS certified mail to have a tracking and if you go little bit up when you are down filing the return you need to sign so if you are filing a paper form you might want to print it out sign it make a copy a lot of states will require um a copy of your IRS form now the schedule K1 but the 10 C5 and the attachment therefore you'll make a copy for the state you'll make a copy for your business record as well but you sign it first before you make those copies and you can read who should sign that it will be the partners or LLC members or you know the general partner or members that are anal of the business so pretty much want to R to see you know who is supposed to file the form and if we go back back to the top you print you sign you date and you just leave the pre prepar option only is for people that are fing and getting paid for it but if you are fing for your business you do not need to complete that session thank you on our on our uh our blog and on our Channel we shared different ways you can save money in different ways you can make money to reach your financial Independence where you do not depend on an employer to provide for your family and filing your own business return is a way to keep your business expenses low it takes time to do that but at the same time if your business is Young it allow you it allows you to know how to track your financial data in a way that you'll be able to find file those to file the return accurately and when you hire somebody to file for you you will be able to provide the right data for the person to work with and on our at Liber download.com you'll be able to find template that you can purchase to manage your finances and your business and at NAS so.com our blog we have free download that you can go through to see if there is any template there that you are interested in we have Financial template and business template and little bit above the free download session we have the federal task form instructionals and we try to save L links IRS links to some uh forms that you'll be able to um download download a not download it but when you click on it it'll take you to IRS page where the form is and you'll be able to download it thank you very much just keep in mind that um if your calendar if you are using calendar year for your business the 1065 is due by March 15 thank you yeah